No more Hess stations; Marathon buying gasoline chain

FINDLAY, Ohio – Marathon Petroleum will spend $2.87 billion to acquire the retail operations of Hess, the largest chain of company-operated gasoline stations and convenience stores on the East Coast, bringing an end to the familiar green-and-white Hess stations whose origins at the Jersey Shore date back to the 1930s.

The deal, which is being orchestrated under subsidiary Speedway LLC, will expand Marathon’s retail operations from nine states to 23 along the coast and in the Southeast. Hess-branded stations will disappear over the next three years, Marathon Petroleum CEO Gary Heminger said on a conference call with analysts.

Hess Corp. has been reshaping itself as a pure production and exploration company since coming under pressure from hedge fund Elliott Capital Management in 2013. It said last year it would seek a buyer for its retail operations.

Hess will use proceeds from the sale for additional stock buybacks. The company boosted its existing share repurchase authorization to $6.5 billion from $4 billion.

Hess was founded in Asbury Park in 1933 by Leon Hess and his father, Mores, who sold heating oil for 4 cents a gallon from a delivery truck. The company built a refinery in the Port Reading section of Woodbridge in 1957 and a year later began oil exploration in Mississippi.

The deal announced Thursday consists of $2.37 billion in cash, an estimated $230 million of working capital and $274 million of capital leases. The transaction includes all of Hess’ retail locations, transport operations and shipper history on various pipelines, including approximately 40,000 barrels per day on Colonial Pipeline that runs from New York to Houston.

“With this significant geographic expansion, we will be able to further leverage our integrated refining and transportation logistics operations, providing an outlet for an incremental 200,000 (barrels per day) of assured sales from our refining system,” Heminger said.

Marathon Petroleum Corp. is itself part of an earlier split in the energy sector in 2012, when Marathon Oil Corp. broke off its refining division so that it could focus on exploration and production.

Hess on Thursday reassured customers that the holiday tradition of the Hess toy truck will continue. The company said that the toy trucks will be sold at Hess retail stores and online this year. Starting in 2015, Hess plans to sell the toy trucks online.

Shares of Hess gained 99 cents, or 1.11 percent, to close at $90.29. Marathon Petroleum fell 78 cents, or 0.89 percent, to close at $86.91.